Japanese auto-maker Isuzu Motors is setting up its first car plant in South India at an investment of Rs 3,000 crore to produce light commercial vehicles and sports utility vehicles which is expected to become operational by 2016, a top company official said today.

"The Rs 3,000 crore investment is for our plant in Sri City (Special Economic Zone at Tada near Chennai).It will be operational in 2016...," Isuzu Motors India President and Managing Director Takashi Kikuchi told reporters here.

The company, which has been supplying its diesel engines to the Ambassador cars owned by Hindustan Motors Ltd, today rolled out its first assembled sports utility vehicle 'MU-7' from Thiruvallur plant near Chennai.

Isuzu Motors has inked a "contract manufacturing" agreement with Hindustan Motors Ltd in June 2013 for assembling 'MU-7', at the latter's manufacturing facility in Thiruvallur situated near Chennai.

Asked what would happen to the agreement signed with Hindustan Motors after Isuzu Motor's own plant becomes operational in 2016, Kikuchi said the company would "continue" to contract manufacture of MU-7 from Tiruvallur plant.

Declining to elaborate, Kikuchi said,"we are still in planning stage (of what will be manufactured from the company's plant at Sri City SEZ).".

The company aimed to increase the level of localisation of MU-7 to 70 per cent when its own plant in Sri City becomes operational in 2016, Isuzu Motors India Executive Vice- President, Shigeru Wakabayashi said.

"After three years (by 2019), we want to have 100 per cent localisation", he said, adding, the company would look at manufacturing one tonnage pay-load, pick-up truck from the Sri City facility.

The firm would aim to serve domestic market from the Thiruvallur plant, he said, adding, they would also look at shipping to overseas markets from Sri City plant after 2016.

To a query, Kikuchi said, the company looks at selling 5,000 units of MU-7 per year for the next three years.

On the dealership networks, he said the company would have eight outlets in South towards the end of this financial year and plans to increase it to 60 by 2016.

Isuzu Motors India had earlier sold 180 units of MU-7 in Indian market as a completely built unit (CBUs). The locally manufactured MU-7 is priced at Rs 22.3 lakh (ex-showroom Chennai) for BS-IV variant and Rs 22 lakh (ex-showroom Chennai) for the BS-III variant.